|
Gold’s (GLD) accelerated move to $1900 in the summer of 2011
past overhead resistance indicated the market was waiting for an inflationary
QE3. The market got a surprise as Bernanke waited until 2012.
This was no surprise for my readers and precious metals declined lower in the
second half depicting a surprise move with gaps lower.
We
were able to call the top in silver (SLV) in April 2011 and gold in September
2011 as it reached overbought conditions, locking in partial profits. On
April 28, 2011 I wrote, “Remember that I am recommending partial
profits if your winnings enable you to play with the house’s money and
you are still holding silver from our August 2010 Buy Signal at
$18. Other readers who have not been able to build a position can wait for
the inevitable pullback as additional buying opportunities.” A few
days later in May we saw a volatile decline in silver of close to 40%.
Likewise
in August of 2011, I became concerned of a correction in gold as it reached
overbought territory. On August 5, 2011 I wrote, “Although
the technical picture for precious metals is improving, there will be periods
of volatility as the global markets shake. A consolidation in gold would be
normal and healthy.” A few weeks later gold topped and corrected
for the rest of 2011.
Mining
equities (GDX) and precious metals sold off hard in the third and fourth
quarter of 2011. When such unexpected short term pullbacks occur we must
monitor the rebound. Negative news which causes a temporary decline
with a powerful recovery indicates strength and resilience.
The
precious metals and natural resource market appears to be finding its footing
and now may return to close some of those downside gaps in 2012
. The recent selling panic in gold and silver bullion has abated
and reversals are beginning to occur. We are on the verge of a breakout
at $35 in silver, $4 copper (JJC) and $1800 gold could be significant.
Junior mining stocks (GDXJ) are also making dramatic moves higher especially
in the uranium (URA) and rare earths (REMX).
One
should never get caught up with a selling panic like the end of 2011
especially in gold and silver bullion which has had significant up moves over
the past 18 months and past ten decades. Recently gold’s
accelerated move to $1900 and silver’s to $50 was overdue for a
restorative, healthy pullback.
It
must be emphasized acting in a knee jerk fashion following the herd and panic
by selling at discounted levels for pennies on the dollar must be
avoided. Some analysts were caught up with the decline irrationally
calling the end to a 10 year bull trend. How foolish!
Gold
and silver are finding support and the end of 2011 was not a time to call the
end of a trend, but to realize that gold and silver was providing a
discounted buying opportunity. The mining shares have never been so oversold in this entire decade long run as it was in
the end of 2011. The recent volatile selloff created an extreme
oversold condition where reversals occur. Although the recent rise has
been on volume, a break above the 200 day on
increased volume for the miners and silver could indicate that the downside
gaps made in 2011 may be closed sooner rather than later and potentially very
quickly.
Gold
Stock Trades has weathered several corrections in miners, gold and silver
over the past 10 years and each time we have maintained a strong hand.
It
is normal and necessary to have corrections. Quality mining equities
and precious metals begin new bases and reach compelling valuations that long
term, contrarian investors can use to their benefit by adding to positions or
initiating purchases in favorite stocks or sectors which one has not
participated in yet.
One
must not be discouraged or give up during volatile selloffs like 2008 or 2010
or 2011 and run to cash. One must use short term volatility to
one’s advantage and go against the latest fad. We buy winter
coats in the summer.
We
must stay focused on the long term trends and realize that the mining stocks
have been beaten down in 2011 to dramatically oversold levels. It is
time to pick up resource stocks especially in uranium, rare earths and
gold/silver explorers (SIL) selling at great discounts.
 
Despite
recent carnage silver and the industrial metals are exhibiting relative
strength to gold in 2012. The long term trend for silver is intact and
it appears to have found support at its long term trend around $30. The
momentum indicators have bounced off oversold levels. Silver has all
the right criteria for a fast move to test all time
highs.
It
is no surprise why the uptrend in commodities is intact. The West is
monetizing debt and printing dollars at a record pace to alleviate the debt
crisis. Risk on has been the name of the game in 2012.
Those
on the sidelines in cash (UUP) and treasuries (TLT), playing risk off are in
fact playing a very risky game as inflation appears to be the flavor of the
day.
Look
for technical breakouts in gold, silver, copper, uranium and rare earths as
they all appear to be reversing higher as the moving averages transition
upward. Don’t be unsettled by short term pullbacks or day to day
volatility. Use pullbacks as opportunities on this long term upward
trend in gold and silver. The risk off trade in Treasuries and the U.S.
dollar appears to be losing momentum and dangerously teetering on a
decline. Pay attention to the ball not the windup as we may be
witnessing a trend change. To get scouting reports, specific targets
and up to the minute updates on the natural resource market click here.
|
